Teachers on the Channel Island tax haven of Jersey look close to taking industrial action after their pay was frozen in order to counter a #163;50 million public spending deficit.
Teachers are also fearful that the financial crisis, coupled with an ageing population, will lead to redundancies in the island's 23 state primary and five secondary schools.
The three main teaching unions are preparing to ballot members over strike action after mediation talks broke down last month.
Indicative ballots have all shown an appetite for a strike on the crown dependency, famously the setting for the 1980s detective series Bergerac.
The States of Jersey government has told public sector workers they will have to accept stiff belt-tightening after it was badly hit by the banking crisis.
The island, which attracts businesses, banks and millionaires on account of its low taxes, has already been forced to introduce a 3 per cent goods and service tax that could rise by up to 12 per cent by 2014.
Elizabeth Murfin, a teacher at Hautlieu School, near St Helier, said teachers understood the financial situation but resented the way the measures had been imposed without negotiation.
"They have just come to us and said we are having a pay freeze, and warned that there could be restructuring and that we could be redeployed," she said. "That, coupled with a series of other cuts and additional taxes, has really upset some people. The cost of living is getting higher all the time and quite a few young teachers from the mainland are thinking, 'Is it worth working here any more?'"
But she added that although a strike was justified, there would be very little public sympathy during the recession.
Starting salaries for teachers in Jersey are much higher than in England, at nearly #163;31,000, but opportunities to move up the scale to much higher pay packets are more limited.
Andy Woolley, regional secretary for the South West at teaching union the NUT, said the situation for teachers was "unacceptable", as they had been slapped with a non-negotiable pay freeze for 2009.
Unions have demanded a 2.1 per cent pay rise on wages backdated to last June, and have appealed for the restoration of negotiating rights. But this was refused, and teachers will receive just 2 per cent from January 2010.
Jersey is a notoriously expensive place to live, with house prices soaring to London levels or more, but even tax relief on mortgages is being phased out by the authorities in a bid to raise cash.
Many teachers from the mainland return home when they find it impossible to buy a property on the island.
Mr Woolley said: "You have to resolve this pay deal first of all, and not just skip that out and look at the forward pay deal. What's on offer there is not in any way attractive in its own right."
Mario Lundy, the States' director of education, has written to teachers saying that he hoped they would not go on strike.
"There is still an opportunity to discuss the current offer," he wrote. "The position for last year has been made absolutely clear and it's in accordance with the States' policy."
A call for teaching assistants to cover lessons in the event of industrial action by teachers has been branded "out of order" by public service union Unite.
- Capital: St Helier
- Status: British crown dependency
- Net profit of banks and other financial institutions (2007): #163;1.46 billion
- Average house price (2008): #163;480,000
- Visitor numbers (1997): 985,000
- Visitor numbers (2007): 739,000
- Total population: 90,800
- Children in state schools: 10,800
- Children in private education: 2,500.